The housing industry knows this story all too well: prices are soaring and demand (until recently) has been relentless yet projects are stalling. The blame often falls on high land values or developer greed, but the real culprit is clear to anyone in the sector—it’s the staggering cost of delivering new homes.

The numbers are sobering. The Canada Mortgage and Housing Corporation (CMHC) says that we need to build 5.8 million new homes by 2030 to restore affordability to 2004 levels. If successful, that would mean that a newly built 1,000-square-foot, two-bedroom condo in downtown Vancouver would sell for $620,000 instead of the $1.5-million that it currently does. 

But here’s the reality: even if land were free and developers waived their profits, that condo would still cost more than $1-million to build. In Toronto, it’s a similar story, with hard costs alone pushing the price beyond $800,000.

By the numbers

Here’s how the numbers break down for that $1.5-million Vancouver condo:

• $294,000 (20 per cent) is for land acquisition
• $490,000 (32 per cent) is for hard costs (i.e. labour, building materials)
• $102,000 (7 per cent) is for soft costs (i.e. architectural designs, legal fees)
• $92,000 (6 per cent) is for marketing and realtor commissions
• $77,000 (5 per cent) is for finance charges and loan interest
• $267,000 (18 per cent) is for government taxes and fees
• $178,000 (12 per cent) is the gross profit margin required by banks to provide financing

(Numbers rounded for clarity)

Climbing costs lead to stalled projects

This isn’t news to anyone in the industry. What’s alarming is how quickly these costs are climbing, forcing projects to stall or fail altogether. In Vancouver and Surrey, B.C. alone, 58,000 homes are paused because the cost of delivering them exceeds what buyers can pay.

So, if the affordability crisis is really a cost-of-delivery crisis, what can be done? While macroeconomic factors like interest rates and global material costs are beyond our control, governments hold significant levers to reduce costs and unlock stalled projects.

Three areas of reform stand out:  

1. Reduce financing costs for housing projects

• Allow development cost charges (DCCs) and municipal levies to be paid at the end of a project, rather than upfront. This would reduce financing costs and free up critical capital.
• Exempt DCCs from GST/PST/HST and land transfer tax calculations—double taxation only inflates prices unnecessarily.
• Expand municipal surety bond programs to replace capital-intensive letters of credit, unlocking billions in tied-up equity.

2. Provide stability for developers 

• End the constant churn of new regulations. Introduce in-stream protections so projects already in process aren’t derailed by sudden policy changes or fee hikes.
• Expand the pre-sale period in British Columbia—currently, developers have only 12 months to meet pre-sale requirements for projects to move ahead, resulting in many projects not launching, or failing to meet requirements. This holds housing projects back that would otherwise be able to move forward 
• Establish a nationwide policy moratorium to provide the sector with a stable planning environment for the next five to 10 years.

3. Implement fairer ways to fund infrastructure and amenities

• Create a municipal services corporation for water and wastewater services so that regional districts can borrow and amortize infrastructure costs over time instead of relying solely on development cost charges.

While these changes require government leadership, the industry has a role to play. Developers need to speak with a unified voice, push for sensible reforms, and share the data that demonstrates the urgent need for change. Transparent conversations about what it actually takes to bring homes to market will help shift public perception and rebuild trust in the sector.

CMHC’s affordability target isn’t impossible—but it demands bold action. The time for incremental adjustments is over. If we want affordability to return to Canadian housing markets, we need governments and industry to tackle the true crisis: the soaring cost of delivering homes.

As we reflect on 2024’s market, I can’t help but draw parallels to another pivotal moment in Toronto’s real estate history: the dramatic correction of the early 1990s. Back then, Toronto experienced what many considered unthinkable: a six-year decline that saw average home prices plummet by 28 per cent from their 1989 peak. The catalyst? A perfect storm of rising interest rates, recession and overbuilding that burst what was then considered Toronto’s first major housing bubble. 

That correction fundamentally reshaped the market. Properties that had been snapped up for $500,000 in 1989 were selling for $350,000 by 1996. Developers went bankrupt, leaving half-finished condominiums dotting the skyline. The term “negative equity” entered the everyday vocabulary of Toronto homeowners, as thousands found themselves underwater on their mortgages.

But if you look back on that period, the market appeared almost “flat” from about 1991 to 1996 after the steep drop. A similar trend can be observed in the chart above, which shows house prices since interest rate hikes started in 2022.

Where we’re at now

Today’s market might echo some aspects of that tumultuous period, with falling prices brought on by once-rising interest rates, perpetual affordability concerns, an election, changes to capital gains structure and more economic uncertainty, especially around unemployment.

So, it may come as a surprise to you that the market was warming up a bit in November (more sales, NOT higher prices). The reason we’re seeing more people buying houses in the Greater Toronto Area (GTA) is affordability.

Affordability is improving in Canadian real estate, and the GTA is at the forefront. In fact, housing affordability in Toronto has corrected more than any other major city in Canada according to the National Bank’s Q3 Housing Affordability Monitor.

A correction means that mortgage payment costs are decreasing as a percentage of household income. When people can afford to buy houses, they do. This phenomenon gave 2024 a relatively strong market in October and November, but December was slowed. 

The biggest support for the improvement in affordability could also be its greatest risk factor. RBC observed that growing household income significantly helped improve affordability in 2024’s third quarter. The challenge is the few key trends that could slow wage growth in 2025:

1. The unemployment rate is rising
2. The majority of job growth has come from government hiring
3. The likely winner of our election is committed to reducing the number of government employees

So, future improvements to housing affordability may come from a reduction in interest rates or house prices. In a healthy market, Toronto’s housing costs 40-50 per cent of median household income, and I expect it will get back there in time.

GTA 2024: A buyer’s market with caveats

For years, the GTA housing market felt like a relentless bidding ground, with escalating prices and scarce supply fueling a sense of urgency. However, 2024’s home sales reached 67,610—up 2.6 per cent from 65,877 in 2023—while new listings surged by 16.4 per cent to 166,121. On paper, this provided buyers with a clear advantage and more choice than they’d seen in years, hinting at a possible market correction.

Yet beneath the surface, the so-called “buyer’s market” has been far from a bargain. Despite the uptick in listings, the average selling price dipped by less than 1.0 per cent year-over-year, settling at $1,117,600 compared to $1,126,263 in 2023. Detached homes continued to command lofty prices, while condominiums —though subject to more notable price declines—still struggled to attract cost-conscious first-time buyers, many of whom stayed on the sidelines in hopes of greater interest rate relief down the road.

Monthly, there were some significant data points. Sales decreased by 1.8 per cent, while new listings and active listings substantially increased by 20.2 and 48.5 per cent, respectively. The average price saw a slight decrease of 1.6 per cent compared to December 2023, and days on market increased by 12-15 per cent.

The 16.4 per cent jump in new listings might suggest an easing of supply constraints, yet many sellers appeared hesitant to lower asking prices. Although the balanced supply-to-demand ratio theoretically favoured buyers, the minimal price drop signals seller resistance to resetting expectations. The gap between buyer hopes and market realities remained stubbornly wide.

Condominiums: A sector to watch in 2025

Of all the sectors in the GTA real estate market, the condominium sector is the one I’m really keeping my eye on. With more new condominium listings than ever before and record new supply added to the market in 2024, it shows no signs of letting up.

There are a few reasons for this. First, the Bank of Canada’s interest rate hikes made it more expensive for people to buy homes, causing some first-time buyers and investors to choose condominiums as a more affordable option. Second, the construction of new condominiums has been booming, which has added to supply on the market.

Despite the supply increase, condominium prices have not yet fallen as much as expected, probably not because demand remains strong but more because sellers have decided to lose money slowly rather than quickly. What I mean by this is the majority of new condominiums have been considered “cash flow negative” in the current market by Benjamin Tal and Urbanation. Based on my analysis, the majority are also “equity negative.” 

Source: Valery.ca Special Report

So, many sellers have set a floor price—that is, a minimum price they’d accept. If they don’t get that price, they decide to rent the unit out rather than sell it at a loss, allowing them to spread out the burden across monthly mortgage payments rather than absorbing it in one shot. 

Source: Robert Marsiglio, Realtor 

2025 predictions: Hope or more of the same?

Looking ahead, optimism for 2025 hinges on continued interest rate cuts and stable or marginally lower home prices. TRREB President Elechia Barry-Sproule expects improved market conditions over the next year, but the GTA market has a remarkable knack for bouncing back swiftly. Prospective buyers banking on continued softness may find themselves outpaced if the market rebounds.

Meanwhile, structural problems remain—congestion, supply constraints and stubbornly high prices. TRREB’s chief market analyst, Jason Mercer, emphasized that government policy reforms must address these core issues. Otherwise, the GTA’s real estate rollercoaster will continue with fleeting windows of affordability that close as quickly as they appear.

Far from a buyer’s utopia, 2024 felt more like an intermission. Yes, deals were occasionally on the table, but “affordable” remained a moving target—especially for those entering the market for the first time. The question persists: as we edge into 2025, will this pause evolve into genuine relief, or is it merely the calm before the next wave of price hikes? Only time—and possibly more interest rate adjustments—will tell.

In 2023, Ontario dominated Canada’s housing searches. Last year, Alberta cities like Edmonton and Calgary captured attention, with their more affordable housing and lower living costs, reports Zoocasa.

This trend shows in Canada’s top five searched cities last year: Toronto, Edmonton, Calgary, Mississauga and Vancouver.

Toronto remains the leader, with one-bedroom rents averaging $2,374 and home prices at $1,061,700. Vancouver follows, with Canada’s highest rents at $2,534 and even higher home prices averaging $1,172,100. Mississauga, a city offering more affordable rents at $2,279, remains a key option for those seeking proximity to Toronto’s bustling urban core.  

Ontario’s housing landscape

Ontario continues to dominate real estate searches, driven by its population density and economic opportunities. Cities like Mississauga, Hamilton, Ottawa and Oshawa follow Toronto’s lead:

Hamilton. An hour west of Toronto, it attracts first-time buyers with relatively affordable home prices and rents.  

Oshawa. Known for its budget-friendly condo townhouses, Oshawa appeals to price-conscious buyers who want easy access to Toronto.  

Ottawa. Canada’s capital offers a stable job market, quality of life and affordable housing compared to Toronto. Its proximity to Quebec’s scenic lakes also makes it a gateway to budget-friendly cottage properties.  

Alberta: A practical, more affordable alternative

As living costs soar, Alberta’s cities provide a practical alternative for buyers and renters.  

Calgary. With one-bedroom rents averaging $1,634 and homes priced at $575,600, Calgary blends urban amenities with outdoor adventures. Its proximity to the Rockies and vibrant cultural scene make it a top choice for families and young professionals.  

Edmonton. A standout for affordability, Edmonton offers one-bedroom rents at $1,355 on average and home prices of $395,400, making it one of Canada’s most cost-effective urban centres. Its robust economy and lower cost of living attract investors and first-time buyers alike.  

Who’s driving the market?

Two key demographics are fueling the housing market. 25-34-year-old young professionals and first-time buyers dominate searches, looking for affordability and urban convenience.

As well, 45-64-year-old buyers seek to downsize or assist their children with housing costs.  

Review the full report here.

Canadian real estate had all of the hallmarks of a great comeback story. Interest rates are falling. House prices are down from the peak. Affordability is returning to the market. The government was throwing policy at the housing problem, despite warnings from the Bank of Canada. It sounds like the setup for a great recovery.

The only question is… when do we get there?

Or, more aptly, “Are we there yet?”.

Instead of a familiar and predictable road, we’ve been left on a long and drawn out road trip. Countless familiar signs have passed us by, yielding no result. We’ve been stuck in a state of wondering, if, not when, in fact, we’d see any signs of recovery appear.

For years we’ve heard reports from the industry of “buyers on the sideline” waiting for some factor to change in the real estate market equation. It would appear that the factor is whether or not prices are going up or down.

“Buy the dip”

Is it possible you might see a rush of buyers trying their hand at the seemingly impossible task of buying the bottom of the market? The age-old advice about “time in the market, not timing the market” seems to be ringing in my ear. At a minimum, the idea might be “buying the expletive dip”, as popularized by Wall Street Bets. Since we don’t have an online community of options-trading degeneracy in Canada, we focussed our speculative fever on the housing market, until we couldn’t any longer.

And so, it appears when people said they’re waiting to see the “dip” or the “bottom” of the real estate market, they might have been looking in the rear-view mirror. This isn’t to say that the bottom is “in” per se. There just seem to be a lot more buyers after three months of consecutive growth in price and volume than there were during three months of declining price and volume.

This is the ironic part about the whole “market timing” thing. If you want to bottom-tick the market, you have to be buying on the way down. If you’re the buyer submitting below-market offers and pulling sales prices down, you create the dip— you don’t buy the dip.

You create the market, you don’t time the market.

By the numbers: Recovery, or relief rally?

Until last month, data hadn’t really indicated even the slightest chance at recovery. September appeared out of character, with the typical back-to-school rush surprisingly muted against the backdrop of the US election, breaking “fall market” seasonal norms to the downside. Staying true to this new and contrarian character, Canadian real estate now seems to be breaking seasonal norms to the upside, heading into November, a month when the market is typically slowing down toward the holiday season.

Should we see sustained upward pressure on the market heading into December, it would be reasonable to imagine that the market is seeing a resurrection of volume from lower rates, increased buying power, and optimism around new mortgage policy.

Increased buyer activity pushes sales higher

Source: CREA, Valery.ca 

According to CREA, national home sales climbed 2.8 per cent in November compared to October, marking the second consecutive month of gains and a cumulative 18.4 per cent rise since May. This jump comes after months of subdued activity earlier in 2024, which was largely blamed on lingering “higher for longer” interest rates.

With the Bank of Canada now slashing rates at a recession-ready pace, sidelined buyers have apparently been pulled back into the market, and the numbers show they’ve arrived in droves.

Not surprisingly, activity was strongest in Canada’s usual real estate powerhouses—Greater Toronto, Metro Vancouver, Calgary’ and Montreal. Smaller cities in Alberta and Ontario also reported double-digit increases in sales, indicating a broad-based uptick. Ontario seems to be back to its former glory of taking nearly half of the monthly dollar volume of sales. However, this surge in activity raises a critical question about whether it represents a genuine recovery or just another temporary spike driven by policy tweaks that artificially boost demand in an attempt to soften the blow of recession and unemployment in 2025. 

Realistically, this market looks a lot more like a typical year (see 2016 to 2019 above) but it feels high relative to last year’s lows, and low relative to the pandemic’s highs. 

Source: CREA, Claude, Valery.ca 

Sellers hold the upper hand

For those looking to sell, the market continues to tilt firmly in their favour. The sales-to-new-listings ratio (SNLR), which measures market balance, rose to 59.2 per cent in November. That’s a significant jump from the 52 per cent to 53 per cent range seen earlier in the year, signalling a tightening market. With fewer new listings coming to market (down 0.8 per cent month-over-month), buyers are left to compete for an ever-shrinking pool of homes.

This imbalance is further reflected in the months of inventory metric, which fell to just 3.7 months nationally—the lowest in over a year. For context, a balanced market typically has 4 to 6 months of inventory. The current figure underscores the fact that supply simply isn’t keeping up with demand, making conditions increasingly competitive for buyers.

Prices “rise”… or did they?

Source: CREA, Valery.ca 

November saw the first notable increase in home prices in nearly 18 months. The National Composite MLS Home Price Index (HPI) rose 0.6 per cent from October, while the actual national average sale price jumped by 7.4 per cent compared to November 2023. These price increases suggest that the demand surge is starting to put upward pressure on home values, particularly in urban centers and desirable smaller markets.

However, the market still shows early signs of recovery rather than runaway growth. While it’s easy to celebrate any price growth, the long-term trend still looks like the “flat market” I’ve been droning on about for the last few years. The HPI remains 1.2 per cent lower year-over-year, highlighting that despite rising demand, the market has not fully rebounded from the downturn caused by the interest rate hikes of 2022 and 2023, which reduced affordability and buyer confidence. This ongoing recovery remains fragile, with the market still vulnerable to external factors. Future rate changes, policy shifts, or economic uncertainty could easily disrupt the momentum.

High supply, high stakes

Source: CREA, Valery.ca 

CREA seems to feel that the inventory situation reveals a chronic problem: Canada’s housing supply continues to fall short of demand. By the end of November, there were just over 160,000 properties listed for sale nationally. While this is 8.9 per cent higher than a year ago, it remains well below the long-term average of 178,000. It seems the industry wants us to interpret this as a sign that we have a structural supply deficiency. On the contrary, it could also be interpreted as a lot of room to grow.

With all this considered, this is still the highest supply environment we’ve seen since the beginning of the pandemic, with a clearly visible and steep upward trend in active listings each year since the rate hiking cycle began.

Looking ahead, the fate of the Canadian real estate market may hinge heavily on the performance of the upcoming spring market. While recent momentum and lower interest rates have provided some optimism, several headwinds could still derail the recovery.

The traditional spring market typically sees the highest volume of transactions and often sets the tone for the rest of the year. However, mounting concerns about a potential recession, declining population growth rates, and rising unemployment could dampen buyer enthusiasm. These economic pressures might outweigh the positive effects of lower borrowing costs and increased affordability.

The key question remains whether the current momentum can build enough steam to overcome these challenges. Early indicators from December and January activity will be crucial in gauging whether this recovery has staying power or if it’s merely a temporary response to policy changes and rate cuts.

Final thoughts

It’s hard to shake a sense of deja vu. Time and time again, interest rate cuts are rolled out as a quick fix and a perceived boost to the housing market, only to exacerbate the underlying issues and kick the can down the road.

Yes, lower rates make borrowing more affordable in theory, but they do not solve the core disparity between income and house prices, negating the benefit for many buyers. Relaxed mortgage rules might help some secure financing, but they also prop up demand in a market already starved for supply.

For first-time buyers, the dream of homeownership remains elusive. Rising prices and dwindling inventory create significant challenges, forcing them to compete against wealthier buyers or investors. While sellers and existing homeowners may take comfort in the rising value of their properties, the broader reality is less optimistic, with a housing market that continues to deepen the divide between the haves and have-nots.

Average asking rents for residential properties in Canada fell to $2,139 in November, marking a 15-month low, according to the National Rent Report by Rentals.ca and Urbanation. This represents a 1.6 per cent year-over-year drop and a 0.6 per cent decrease compared to October. The decline follows a similar trend from earlier in the fall, with rents down 2.2 per cent over the past three months.

“Overall, the recent decline in rents has been very mild and is allowing affordability to improve following a rapid escalation in rents over the past few years,” said Shaun Hildebrand, President of Urbanation. “Declines so far are mainly focused within the secondary market for condos and houses, mostly in B.C. and Ontario, while purpose-built rents are stable.” 

Despite the drop, rents remain significantly higher than historical levels. They are up 6.7 per cent compared to two years ago and 18.8 per cent from three years ago. Over the past five years, rents have increased at an average annual rate of 3.4 per cent, which according to the report is “generally in line” with long-term trends.

Regional variations highlight market differences

Ontario saw the steepest declines, with average apartment rents dropping 6.4 per cent year-over-year to $2,351. Two-bedroom apartments in the province saw the largest drop, down 7.6 per cent. B.C. also reported a decrease, with rents falling 2.3 per cent annually to $2,524. Quebec saw a marginal decline of 0.4 per cent, bringing the average asking rent to $1,969.

Other  provinces bucked the national trend. Alberta rents rose 3.7 per cent, while Saskatchewan saw a 12.1 per cent jump and Manitoba’s average rent jumped 7.9 per cent. In the Maritimes, rents grew by 5.1 per cent in New Brunswick and 4.4 per cent in Nova Scotia. Newfoundland and Labrador remained relatively stable, with rents declining by only 0.4 per cent.

Declines in Canada’s largest cities 

Rents fell in Canada’s five largest cities. Toronto’s average asking rent dropped 9.4 per cent year-over-year to $2,640, reaching a 28-month low. Vancouver saw an 8.9 per cent decline to $2,888, its lowest point in 30 months. Calgary, Ottawa and Montreal also reported year-over-year decreases of 5.8 per cent, 3 per cent and 2.3 per cent, respectively.

The Canada Mortgage and Housing Corporation (CMHC) mortgage loan insurance program is a government-backed initiative that allows homebuyers to purchase properties with less than a 20 per cent down payment. 

Initially designed to help Canadians without significant savings enter the housing market, CMHC insurance has since become the single greatest catalyst of real estate demand in the federal government’s arsenal. 

Perhaps unsurprisingly then, as this dying government seeks any avenue to revive its political fortunes in advance of next year’s election, CMHC has recently announced that it is increasing its coverage on homes from $1-million to $1.5-million to permit for “greater affordability.”  However, our collective fiscal interests demand the opposite: CMHC insurance should be gradually phased out.

“Over the past 40 years, its effect on the market has been disastrous; incomes have become seriously misaligned from today’s house prices.” 

The dynamics of Canadian housing boil down to basic Economics 101: supply and demand. The more demand there is for homes, the more the price goes up but, critically and somewhat un-intuitively in this case, the demand in question is borne of monetary availability and not people. 

During the pandemic, the government increased the monetary supply by 25 per cent in a single year. That was what fuelled runaway housing prices; with more money in hand, even with roughly the same number of people, more houses were purchased than ever before. When quantitative tightening took place in the years following the pandemic, demand fell.

CMHC insurance functions as a form of monetary stimulus, artificially inflating housing demand.  Over the past 40 years, its effect on the market has been disastrous; incomes have become seriously misaligned from today’s house prices. 

The result is clear; young people cannot afford homes and the dream of home ownership is a reality now restricted to those 75 years and older. Meanwhile, those who are fortunate enough to afford CMHC-insured mortgages often face crushing debt burdens that deprive them and their young families of savings, life experiences and the superior quality of life that Canadians have enjoyed in the past.

Canadian housing prices are past a pivotal point and it is time we addressed the source of the contagion in a head-on, direct manner. Reducing CMHC insurance availability will impact the buying abilities of Canadians but, if we are honest with one another, we are at a point where the average person cannot afford homes even with that assistance. 

The average home price in Toronto is more than $1.1-million. To afford a property in that price range, a person requires $263,300 in gross income and, within such a pricing matrix, CMHC has seen its role reversed from the great enabler of home ownership to the source of pain for most Canadians whose housing markets CMHC infused-pricing pushes ever higher with every passing year.

“We need to gradually phase out CMHC insurance and, in the process, lessen the monetary demand for housing.”

It’s time to confront this issue directly. We need to gradually phase out CMHC insurance and, in the process, lessen the monetary demand for housing. Over time, this correction would restore the long-term balance between incomes and house prices, making homeownership attainable again for the average Canadian.

Though once borne of good intentions, CMHC is now hurting our markets, our youth and our collective future. We owe it to the next generation to chart a new course. The elimination of CMHC insurance must become a priority for the next federal government. It’s time to pull the trigger on reform and rebuild a housing market that serves Canadians.

Housing industry experts agree that new mortgage rules taking effect on Dec. 15, 2024, will have a positive impact on the road to recovery for the Canadian housing market. However, their effectiveness will likely be short-lived, hindered by several factors.

The two key changes introduced by the federal government are:

1. Expanding access to 30-year amortizations for all first-time homebuyers and buyers of new builds, aimed at reducing monthly payments.
2. Increasing the insured mortgage limit to $1.5-million, making it easier for buyers in high-cost markets like Toronto and Vancouver to qualify for a mortgage with a down payment below 20 per cent.

These changes, analyzed in a recent report by TD Economist Rishi Sondhi are expected to fuel some activity. 

“We don’t think that these measures alone will unleash a housing boom,” Sondhi explains. “Instead, they’ll likely offer a secondary tailwind to a market that’s already gaining decent traction in 2025 on the back of lower borrowing costs and a gradually improving economy. What’s more, the affordability boost offered by these measures will likely also erode as home prices are raised by their implementation, thereby limiting their effectiveness.”

In other words, these two new changes offer somewhat of a catch-22: While they help more first-time buyers enter the market, the resulting demand will likely drive prices higher, reducing affordability once again.

“There’s no silver bullet solution to help boost the Canadian real estate market,” Karen Yolevski, COO, Royal LePage Real Estate Services Ltd., agrees. “Any new rules that help first-time homebuyers are welcome, but they don’t fix the underlying issues of affordability and supply.”

Effective policies—not just rules—are needed that drive change long-term, she adds.

Rule #1: Extended mortgage amortizations

The report estimates that a first-time homebuyer with a typical family income, facing a typical house price, who puts down the minimum mortgage payment could see their purchasing power increased by around 9 per cent.

While significant, the change applies only to first-time buyers with insured mortgages—a relatively small segment of the market. According to Bank of Canada data, only 44 per cent of sales involve first-time buyers, and just 20 per cent of mortgages issued this year have been in the insured space. TD Economics predicts that share may rise following these changes, but its overall market impact will remain limited.

Rule #2: Insured mortgage cap increase 

Raising the insured mortgage threshold to $1.5-million could make a substantial difference for buyers in high-cost markets. For example, a purchaser buying a $1.2-million detached home in Toronto (the median price in August) could now make a down payment of $95,000, compared to $240,000 under the current rules.

TD Economics estimates that about 20 per cent of homes in Canada are priced between $1-million and 1.5 million, potentially signalling a sizeable boost to activity from this policy.

How will these rules impact the housing market? 

Sondhi projects a notable lift in home sales and prices in early 2025, bolstering what is expected to be a strong year overall. However, the impact will likely be dampened by several factors.

For instance, the extended amortizations benefit only first-time buyers, and the raised insured mortgage limit may not fully address the needs of this group, as many may still struggle to afford homes in the targeted price range.

Yolevski notes some Canadians, particularly those in Vancouver and Toronto, haven’t been able to save enough of a down payment as real estate prices have risen, and these changes might provide a short-term break, says Yolevski.

“Anything that gives more attention to housing is positive,” she emphasizes, adding that every level of government has housing on its radar. “The government needs to focus on getting shovels in the ground as soon as possible to boost housing starts,” she explains, adding that the underlying problem of medium- and long-term supply coupled with affordability can’t be ignored. Unless a plan to continually increase supply is implemented, the success of any rule changes will be short-lived.

Buying power could be increased by 12% for some Canadians

Ron Butler, a veteran mortgage broker with Butler Mortgage Inc. based in Toronto, says Canadian insurers estimate that these two changes combined could lift buying by about 12 per cent—8 per cent by extending amortization to 30 years and 4 per cent by raising the insured mortgage cap to $1.5-million. 

Any movement—even incremental—is positive news, Butler says, adding that mortgage rate decreases will fuel buying across Canada even more. 

Two additional mortgage rules were announced: The first, effective Nov. 21, 2024, exempts homeowners renewing a mortgage from the 2 per cent stress test qualifying rate if they are transferring to another lender for a straight switch. This change provides added flexibility and simplifies the process of shopping for better rates and products. 

The second rule, effective Jan. 15, 2025, allows homeowners to access up to 90 per cent of their home’s value through default-insured refinancing to build secondary suites. The aim is to increase the long-term rental supply in high-demand areas while helping homeowners manage rising mortgage costs.

More changes coming?

There could easily be more changes in the near future, says Butler. This is because introducing new rules doesn’t cost the government anything in their budget, but makes them appear active on the housing front. 

But, again, while short-term supply may be fueled by rule changes, the focus on mid- and long-term supply solutions must remain front and centre for Canadians to truly benefit.

When it comes to housing policy, there are never easy answers, and there are always trade-offs that need to be balanced. When the federal government recently announced increasing amortizations to 30 years for first-time homebuyers along with increasing the cap on insured mortgages from $1-million to $1.5-million, it was the first loosening of mortgage regulations in over a decade. 

The policy was largely met with cheers from the real estate sector, where activity has slumped, while also garnering concerns about a counter-productive demand stimulus at a time when prices are high and debt burdens heavy. 

How affordability challenges have intensified

Beyond the cynical take that this shift in policy is simply outreach to young voters by a struggling incumbent party, it is worth examining why a change in policy is needed. The truth is that the pandemic radically exacerbated pre-existing affordability issues all across Canada as demand diffused into smaller markets. 

Without adequate supply to absorb that sudden flood of demand, prices skyrocketed. As a result, affordability, especially for young people, has only become more challenging. Prices are high, saving for a down payment is an ever-increasing hurdle and the multi-decade downtrend of mortgage rates has ended. 

B.C.’s unique struggle

In B.C., where affordability is particularly difficult for young people, housing frustration is at an all-time high.  This is best illustrated by the share of people aged 25 to 35 not living in what is known as a “minimum household unit”—that is, a situation where people live together but would rather live apart—is at a 40-year high. More than 40 per cent of that age cohort is living in a less-than-desired form of household. 

The announced changes to mortgage regulations will help that frustration in three ways:

Expanded amortization

First, allowing first-time homebuyers to qualify and structure payments at a 30-year amortization will help with monthly cash flows by lowering payments. This will also allow first-time homebuyers who were at the margin of qualifying under a 25-year amortization to enter the ownership market. 

Yes, these measures will mean paying more interest over the life of the mortgage, but as these families prosper and grow their incomes, they can make pre-payments or adjust their payments in ways to mitigate the added burden. What’s more, gains in home equity from even gradually rising home prices will offset some of the added cost. 

Higher insured mortgage limits for young families

Second, increasing the threshold for insured mortgages will help young families that have sufficient incomes but little savings to qualify for family-oriented housing in large cities, where finding an extra bedroom or two often means a million-dollar price tag. 

With the status quo, the move from $999,000 to $1-million meant a leap in the required down payment from about $75,000 to $200,000. As such, many families that would have liked to move up to more adequate housing were locked out from doing so, causing overall turnover in the housing market to decline. 

Increasing the threshold to $1.5-million will prevent the bunching up of demand that we observe under the current $1-million price threshold, taking pressure off prices by spreading demand across the price distribution. This should also free up more affordable housing and rental units as growing households move up the housing ladder–a process known as “vacancy chains.”

Incentivizing new construction with policy changes

Finally, Canada has a significant housing supply deficit and there is no scenario for improved affordability that does not require a record amount of new construction over the next decade. Allowing 30-year amortizations for buyers of new construction will help to induce demand for new units, facilitating a much-needed investment in new housing supply.

Can the market absorb a boost in demand?

As for the downside of these policies, there is always the risk with demand stimulus that prices are driven higher, particularly given that demand should also be given a boost by falling interest rates. However, initial conditions matter. These policies are coming into effect at a time when sales activity is running about 10 per cent below normal across Canada and closer to 20 per cent below normal in expensive markets like Vancouver and Toronto. Moreover, the total inventory of homes for sale has accumulated to healthier levels over the past two years, and governments are finally pursuing supply-side stimulus as well. 

Here in B.C., the government expects changes to zoning will boost new home construction by between 200,000 and 300,000 units beyond the status quo over the next decade. Consequently, markets should be able to absorb an uptick in demand without putting undue pressure on home prices.

Ultimately, we must weigh the benefit of better housing options for young Canadians facing the worst housing affordability in generations with the potential costs of stimulating demand or adding to debt burdens. It is a trade-off, but one that is well worth the cost. 

The British Columbia election is making headlines and capturing attention throughout the province, yet the proposed solutions to address one of the most pressing issues — housing affordability — have largely missed the mark.

Conservative plans: ‘Rustad Rebate’, ‘Get BC Building’

Let’s start with the Conservatives’ Rustad Rebate, a $3,000 monthly credit on rent or mortgage interest costs. While well-intentioned, this rebate seems to be a short-term fix that skirts around the larger systemic issues plaguing the housing market. This plan risks inflating property values further by offering rebates instead of addressing the root causes of high housing costs. The rebate could also inadvertently increase demand without a corresponding surge in supply, thus exacerbating the affordability issue it aims to alleviate. 

To be fair, the Conservatives have offered other housing solutions beyond the Rustad Rebate in the form of the “Get BC Building” plan. 

The costed platform and details of this plan were revealed just days before the election, leaving experts little time to understand the long-term implications of the proposed initiatives. Moreover, the platform sets an ambitious and unrealistic GDP growth target of 5.4 per cent, along with a deficit comparable to the one presented by the NDP. A lot of the content focuses on criticizing the NDP rather than providing further details on potential solutions.

Rustad’s proposal to develop new towns certainly captures attention and sparks creativity. But, many British Columbians, including myself, are eager to learn more specifics about how the details of this ambitious plan would be implemented. 

NDP plans: Cover 40% of a home’s cost for new buyers, tax cut & more homes for middle-class

On the NDP front, David Eby’s pledge to cover 40 per cent of a home’s cost for new buyers is similarly problematic, essentially transforming the NDP into the very speculators they criticize. 

While it’s designed to simplify entry into the housing market, this may also result in higher home prices, as sellers anticipate greater purchasing power from buyers. This also only targets a small group within the larger housing market in B.C. – first-time buyers. While we can all agree that first-time buyers are having an increasingly hard time getting into the market, this excludes equally important groups like young couples looking to start a family and seniors looking to downsize.

The plan also ties homeowners to long-term financial commitments that could become a burden if personal circumstances shift, echoing concerns from economic analysts about its potential to create new forms of financial insecurity. 

The NDP’s plan, combined with the Federal Liberals, could also significantly impact our housing market by encouraging potential buyers to pursue short-term incentives for homes that may ultimately exceed their long-term financial capabilities.

Both strategies reflect a trend toward using public funds to bring down housing costs. However, critics argue that these financial interventions don’t tackle fundamental issues such as property taxes and the cost of developing a project, which stand as significant barriers. 

Beyond Eby’s big idea to fund housing costs for new buyers, the NDP proposed a $1,000 boost for household budgets through a middle-class tax cut, along with a plan to intensify efforts against speculators and build 300,000 new homes for the middle class, which appear to be a fresh spin on their earlier policies. 

Green plans: Rental support & emergency housing

And lastly, the Green Party’s focus on rental support and emergency housing clearly leans on the public sector to boost housing supply and protect affordable rentals. While the public sector definitely has a role in making housing more affordable, we can’t forget about helping the private sector too. This approach overlooks a chance to come up with strong, creative policies that could connect with a wider audience looking for real change.  

Many of these electoral solutions fail to address the root causes of the complex housing affordability crisis in the region. From what we can see, even when they do acknowledge these underlying issues, they often lack specific details on how the party plans to implement effective measures.

Key solutions missing from the discussion include addressing the skilled worker shortage affecting home construction, slowing the growth of housing prices to allow wages to catch up, collecting wealth windfalls from zoning changes to fund affordable housing and implementing strategies to control costs in the regular housing market.

Ultimately, these housing strategies, though well-intentioned, risk becoming costly stopgaps. True progress demands policies that not only offer immediate relief but also pave the way for sustainable growth in our housing supply. B.C.’s housing crisis calls for a balanced approach that includes fiscal responsibility, market dynamics and long-term planning — a challenge that remains unmet in the current political discourse.